The ThinkBig Africa Insight to 2025
Consumer spending in Africa is projected to reach $2.1 trillion by 2025
The following strong structural fundamentals are in place to drive the consumer opportunity:
- A Young and Growing Population. The continent’s population is projected to grow by 20 percent over the next seven years, with Africa’s youth making up 40 percent of the total. By 2025, almost one-fifth of the world’s people will be living in Africa. This population growth is accompanied by falling dependency ratios and an expanding workforce: the size of Africa’s working-age population is expected to surpass both India’s and China’s by 2034.
- Rapid Urbanization. By 2025, an additional 190 million people in Africa are expected to be living in Urban areas, which means that about 45 percent of the population will be urbanized by then. City dwellers are voracious consumers: per capita consumption spending in large cities in Africa is on average 79 percent higher at the city level than at the national level. Cities in Kenya and Nigeria, for instance, have per capita consumption rates that are more than double the country rates. The top three cities in Ghana and Angola will account for more than 65 percent of national consumption spending in each of these countries.
- Rising Incomes. Since 2005, increases in spending per household have been responsible for about 40 percent of consumption growth in Africa. By 2025, 65 percent of African households will be in the “discretionary spending” income bracket (earning more than $5,000). Consequently, the profile of goods and services that Africans purchase will shift, from basic necessities toward more discretionary products.
- Widespread Technology Adoption. Technology is opening many new doors for consumers. Mobile Money, for instance, is growing five times faster in Africa than in any other region. By 2020, half of Africans—up from 18 percent in 2016—are expected to own a smartphone, which they can use to buy and sell products and services, pay bills, and make remittances. A study in Kenya found that families with M-Pesa mobile money were able to withstand financial shocks (such as illness) without reducing their consumption, because they could borrow money electronically from friends and family. The success of e-commerce company Jumia—colloquially referred to as “the African Amazon.com”—is partly due to the fact that it accepts mobile payments, allowing even Africans who don’t have bank accounts to make purchases. E-commerce and m-commerce offerings are partially leapfrogging formal retail, and our analysis suggests that e-commerce could account for 10 percent of retail sales in Africa’s largest economies by 2025.
These factors bode well for the continued growth of Africa’s Consumer sector.